Germany politics: Sticking points in "Jamaica coalition" negotiations

Following the election on September 24th, coalition negotiations will take place between the Christian Democratic Union (CDU), The Greens and the liberal Free Democratic Party (FDP).

We expect these negotiations to be difficult and protracted, given deep ideological differences between the parties concerned, in particular on questions of taxation, refugee policy and environmental issues.

Our view is that compromises will eventually be reached to enable a government between these parties to be formed, but this will not be achieved until December at the earliest.

Germany's election could have produced a range of potential coalition outcomes, but the result has rendered many of these redundant. Just one realistic option is now on the table: a government made up of the CDU, The Greens and the FDP, termed a "Jamaica coalition" because the parties' combined colours are those of the Jamaican flag. Forming the coalition will take time and will not be straightforward, but the new government is likely to be in place sometime in December.

The CDU, led by Angela Merkel, the chancellor, remains the strongest party in the Bundestag (the lower house of parliament) after the election. However, the CDU is now a much weakened force. Rather than achieving her preferred option of a government with the FDP, with which the CDU governed in 2009‑13, Ms Merkel now finds herself forced to try to cobble together a coalition with both the right-leaning FDP and the left-leaning Greens.

In this particular constellation, the position of the Christian Social Union (CSU), the CDU's smaller Bavarian sister party, will be important. The CSU suffered a stinging defeat in the election, losing over 10 percentage points of support compared with 2013. It will be keen to improve its profile in the run-up to a regional election in Bavaria next year. That is likely to mean a sharper tone on immigration and integration as part of attempts to win back support from the far-right, populist Alternative for Germany (AfD), which increased its overall vote share from 4.7% in 2013 to 12.6%, enabling it to enter the Bundestag for the first time.

The Bavarian regional election may be at the forefront of CSU thinking, but the other parties are also still on an election footing, as Lower Saxony will be holding a state election on October 15th. This means that for the next two weeks little of substance is likely to emerge from talks between the parties at the federal level.

Policy challenges

The Social Democratic Party (SPD) has made clear that it will be spending the next four years on the opposition benches. There is no reason to doubt the sincerity of that aim, given the impact that governing in a grand coalition has had on the party's electoral prospects, and that should it go into government again this would leave the AfD as the largest opposition party. Moreover, given that no one except the AfD is likely to benefit from new elections, there are good reasons for all of the potential governing partners to strike a deal.

Much has been said in the media about the differences between The Greens and the FDP. However, both are socially liberal, and finding ways to keep them both happy is something that a skilled operator like Ms Merkel should be able to manufacture. In the area of taxation this will nonetheless require much political skill. The FDP claims to want to cut €30bn per year from the tax burden, whereas The Greens see the state as needing greater resources to carry out a broader range of public functions. Compromise is possible, and indeed likely, but the FDP will be painfully aware that its failure to meet promises to reduce the tax burden was one of the main reasons for its collapse in vote share in 2013, which saw it lose all representation in the Bundestag.

The real stumbling block will come when the issue of refugees is discussed. The Greens and the CSU have particularly different ideas in this area. The CSU was already unhappy that Ms Merkel's grand coalition had rebuffed its ideas about an annual upper limit for refugees, and in the light of the party's current electoral weakness ambitious and influential politicians such as Markus Söder will be setting this out as one of the party's red lines. Ms Merkel will have the support of The Greens in resisting this, but she will also be aware that she needs to give the CSU something to keep her Bavarian allies on side.

Furthermore, the Greens want to allow refugees to be reunited with their families. The CSU is highly unlikely to agree to such a liberal idea. Given the threat posed by the anti-immigration AfD, the CSU's already disgruntled grassroots supporters are unlikely to support what would effectively look like a sanctioning of further immigration.

All of the parties start from roughly the same position in terms of climate change—all, for example, support the Paris climate accord. However, they differ on how they believe these goals should be achieved. The Greens want to close Germany's coal-fired power stations immediately, and by 2030 they want all energy to come from renewables. The FDP sees this as excessively dogmatic and would prefer to talk about shorter-term economic issues, such as the spiralling cost of the so-called Energiewende, the country's transition to sustainable energy. By 2030 The Greens also want to see no new cars built with combustion engines; state-imposed deadlines will again not sit well with the free-market FDP.

Compromises likely

In many of these areas the potential coalition partners are likely to be able to reach compromise solutions. Given the importance to all actors of forming a government, The Greens and the FDP in particular are likely to find creative ways of using language so that they can keep their supporters happy but also do enough to keep their governmental partners on side. This will be particularly true for The Greens' environmental plans.

In terms of refugees, the most likely compromise will mean kicking the can down the road. The outgoing grand coalition of the CDU and SPD has already done this on the issue of family reunification, postponing a decision until 2018. This is likely to be fudged in some way in the coalition agreement. The same applies to setting an upper limit on the number of refugees that Germany accepts in future. This will enable a government to be formed, but will mean further difficult discussions between the coalition partners in the coming years.